Marston's absorbs beer rises

Marston's Pub Company is to absorb a series of price rises to help tenants through the first quarter of 2009.

The move comes in the context of intense discounting from managed operators and an expected reining in of spending by consumers in the early months of 2009. It will put pressure on other major tenanted operators to shield hard-pressed tenants.

Marston's Pub Company has written to all its 1,700 tenants and lessees to say that it will absorb price increases from Scottish & Newcastle (S&N), Diageo and InBev — plus rises expected from other major lager producers — until 20 April this year. The company will also absorb duty increases expected to be unveiled by the Chancellor in his Budget on 17 March, until 20 April.

In addition, the company will peg the wholesale cost of its own beers until autumn 2009 at least — a full year after it last increased prices. Pub company boss Alistair Darby said: "In-creases in the price of S&N products such as Foster's, for example, work out at in excess of £20 a barrel in wholesale terms. Pubs would have to increase their prices by 20p a pint, which we don't think is reasonable or achievable in the current market.

"Confidence is fragile and we want tenants to get through the first quarter and Easter before thinking about changing their prices."

Marston's will also aim to limit the wholesale price increases coming through from the major lager producers after 20 April.

The Marston's strategy means that its average pub will avoid around £2,500 in price increases annualised out, which means Marston's is preventing around £4m in costs being added to their retailers' businesses.

An industry observer said: "It's a £4m opportunity cost of not passing on the whopping lager brewers' wholesale price increases in full. It is primarily a future margin uplift foregone."

Darby said: "We are fortunate that we did not plan for such large increases, so we are not under pressure to pass them on in full for the good of our tenants."

He said tenants would have at least 10 weeks to decide, in conjunction with their business development managers, how much they will increase prices in late April. Marston's is planning to "protect margins by selling more volume" in the wake of the decision to peg prices, added Darby.

Meanwhile, Greene King Pub Partners managing director David Elliott said: "We have no plans at this stage to increase prices."

Punch Taverns said in a statement it "is still finalising details of its pricing plans for this year so is unable to comment further at this stage".

Scottish & Newcastle Pub Enterprises is passing on wholesale price rises to tenants when the increases come in.